scholarly journals Estimation of Maximum Potential Losses for Digital Banking Transaction Risks Using the Extreme Value-at-Risks Method

Risks ◽  
2022 ◽  
Vol 10 (1) ◽  
pp. 10
Author(s):  
Moch Panji Agung Saputra ◽  
Sukono ◽  
Diah Chaerani
Keyword(s):  
Risk Management ◽  
Operational Risk ◽  
Threshold Value ◽  
System Failures ◽  
Operational Risks ◽  
Data Value ◽  
Kolmogorov Smirnov ◽  
Potential Risks ◽  
Potential Losses ◽  
Financial Transactions

The application of industry 4.0 in banking presents many challenges, with several operational risks related to downtime and timeout services due to system failures. One of the operational risk management steps is to estimate the value of the maximum potential losses. The purpose of this study is to estimate the maximum potential losses for digital banking transaction risks. The method used for estimating risks is the EVaR method. There are several steps in this study. The first step is to resample the data using MEBoot. This process is a simulation of the operational risk loss data of digital banking. Next, the threshold value is determined to obtain the extreme data value. Then, a Kolmogorov–Smirnov test is conducted to fit the data with the GPD. Afterward, the GPD parameter is estimated. Then, EVaR is calculated using a portfolio approach to obtain a combination of risk values as maximum potential losses. The analysis results show that the maximum potential loss is IDR144,357,528,750.94. The research results imply that the banks need to pay attention to the maximum potential losses of digital financial transactions as a reference for risk management. Therefore, banks can anticipate the adequacy of reserve funds for these potential risks.

La gestión del riesgo operacional en la banca chilena

Oikos ◽  
2016 ◽  
Vol 19 (40) ◽  
pp. 47
Author(s):  
Cristian Muñoz Anziani ◽  
Alex Medina Giacomozzi
Keyword(s):  
Risk Management ◽  
Standard Model ◽  
Operational Risk ◽  
Bank Regulation ◽  
Optimal Management ◽  
Management Tools ◽  
Operational Risks ◽  
The Standard Model ◽  
Potential Losses

RESUMENEste artículo tiene como objetivo presentar las herramientas de gestión fundamentales que permitan una administración óptima de los riesgos operacionales, con el fin de mitigar las eventuales pérdidas, en los bancos, derivadas de este riesgo. La utilización de distintas herramientas de administración permite identificar, medir, controlar y monitorear los riesgos operacionales. El modelo estándar presentado, deja espacio para adaptaciones de acuerdo a la necesidad específica de la entidad financiera.Palabras clave: riesgo, Basilea, riesgo operacional, regulación bancaria, sistema financiero.Operational risk management in the chilean banking ABSTRACTThis article aims to present fundamental management tools that enable optimal management of operational risks, in order to mitigate potential losses, banks, derivative risk. The utilization of these tools incorporated as a whole, allows to identifying, measure, monitoring and controlling operational risks. The standard model presented, leaves room for adjustments according to the specific needs of the financial institution.Keywords: risk, Basilea, operational risk, bank regulation, banking system.A gestão do risco operacional no sistema bancário chilenoRESUMOEste artigo tem como objetivo apresentar as ferramentas fundamentais de gestão que permitam uma óptima administração dos riscos operacionais, a fim de mitigar as eventuais perdas nos bancos, resultado destes riscos. O uso de diferentes ferramentas de administração permite identificar, medir, controlar e monitorar os riscos operacionais. O modelo standard apresentado deixa o espaço para ajustes de acordo com a necessidade específica da entidade financeira.Palavras-chave: risco, Basilea, risco operacional, regulamentação bancária, sistema financeiro.

scholarly journals How Can Enterprise Risk Management Help in Evaluating the Operational Risks for a Telecommunications Company?

2021 ◽  
Vol 14 (3) ◽  
pp. 139
Author(s):  
José Ruiz-Canela López
Keyword(s):  
Risk Management ◽  
Banking Sector ◽  
Operational Risk ◽  
Field Work ◽  
Risk Identification ◽  
Enterprise Risk Management ◽  
Management Tool ◽  
Self Assessment ◽  
Operational Risks ◽  
Enterprise Risk

Operational risk is defined as the potential losses resulting from events caused by inadequate or failed processes, people, equipment, and systems or from external events. One of the most important challenges for the management of the company is to improve its results through its operational risk identification and evaluation. Most of Enterprise Risk Management (ERM) scholarship has roots in the finance/risk management and insurance (RMI) discipline, mainly in the banking sector. This study proposes an innovative operational risk assessment methodology (OpRAM), to evaluate operational risks focused on telecommunications companies (TELCOs), on the basis of an operational risk self-assessment (OpRSA) process and method. The OpRSA process evaluates operational risks through a quantitative analysis of estimates which inputs are the economic impact and the probability of occurrence of events. The OpRSA method is the “engine” for calculating the economic risk impact, applying actuarial techniques, which allow estimation of unexpected losses and expected losses distributions in a TELCO. The results of the analyzed business unit in the field work were compared with standardized ratings (acceptable, manageable, critical, or catastrophic), and contrasted against the company’s managers, proving that the OpRSA framework is a reliable and useful management tool for the business, and leading to more research in other sectors where operational risk management is key for the company success.

scholarly journals Risk Management System in PT. Unilever Indonesia, Tbk

2019 ◽  
Vol 3 (1) ◽  
pp. 38
Author(s):  
Rizky Amalia Sinulingga
Keyword(s):  
Risk Management ◽  
Internal Audit ◽  
Cash Flows ◽  
Risk Environment ◽  
Operational Risks ◽  
Business Results ◽  
Cleaning Agents ◽  
Result Show ◽  
Declining Demand ◽  
Potential Risks

Unilever is a multinational company produced various products which are foods, beverages, cleaning agents and personal care. One most important BoD duty are responsible for identifying and evaluating the company’s exposure to risks, and ensuring that potential risks are effectively mitigated. Effective risk management is fundamental for great business management, and Unilever Indonesia’s success as an organization depends on company ability to identify and exploit the key risks and opportunities for the business. Internal assurance and compliance monitoring are in place to review the strategy risk setting. Internal independent re-assurance (internal audit and corporate audit) and external re-assurance play a key role in ensuring that operational risks and business execution risks are properly addressed and managed. This research aims to describe the Unilever business risk matrix in the recent risk environment and concerned were assigned to manage the risks within their respective streams. The result show, the highest risk that Unilever faced is high competition because competitors have more differentiated products and declining demand for the company product. The mitigation must be implemented to reduce the loss. The company should monitor external market trends and collect feedback from consumer, Implemented research and development function to translate the trends, Regularly update business forecast of business results and cash flows and rebalance investment priorities, and also Flexible business model allows the company to adapt all portfolio and respond to develop new offerings.

scholarly journals Roles and responsibilities for managing operational risk in a banking environment

2008 ◽  
Vol 5 (3) ◽  
pp. 34-46
Author(s):  
Jackie Young
Keyword(s):  
Risk Management ◽  
Operational Risk ◽  
Main Role ◽  
Banking Supervision ◽  
Operational Risk Management ◽  
Roles And Responsibilities ◽  
Global Institutions ◽  
Basel Committee ◽  
Operational Risks ◽  
Role Players

Operational risk management is one of the fastest growing management disciplines within a banking environment as a result of various disastrous international incidents. Subsequently, various global institutions got involved in order to ensure that the effect of similar events do not negatively influence the international industries, for example, the Basel Committee on Banking Supervision regarding banks. It is, however, a known fact that operational risks are difficult to manage, as it is not easy to quantify. Therefore, it is of the utmost importance to understand the concept of operational risk management and, more specifically, the actual roles and responsibilities of various role-players within an organisation. This paper aims to identify the main role-players involved in the management of operational risk in a banking environment and to identify their specific roles and responsibilities

scholarly journals Operational Risk Management in A Commercial Bank

2018 ◽  
Vol 7 (4.36) ◽  
pp. 524
Author(s):  
I. I.Vasiliev ◽  
P. A. Smelov ◽  
N. V. Klimovskih ◽  
M. G. Shevashkevich ◽  
E. N. Donskaya
Keyword(s):  
Risk Management ◽  
Development Strategy ◽  
Commercial Bank ◽  
Operational Risk ◽  
Strong Impact ◽  
Credit Institution ◽  
Operational Risk Management ◽  
Operational Risks ◽  
Empirical Level ◽  
Analysis And Synthesis

The existing financial and economic situation in the world and in Russia impacts the activities of all sectors of the economy, including posing challenges for banks. In the conditions of prolonged instability, the banking community has to pay great attention to the risks taken and to manage them. Among all the risks that the bank is exposed to, operational risks represent a separate group due to its specifics, a lack of a systematic approach to analysis and a lack of identification criteria requiring more detailed study. The operational risk is unique in that, although it affects virtually all areas of the credit institution, it is difficult to establish and separate it from other bank risks. It should be noted that every year there appear all new types of operational risk that have a strong impact on the activities of the credit institution due to the development of information and computer systems, the complication of the instruments of the stock market and the improvement of business methods. Therefore, regulators of all countries try to constantly improve the regulatory framework related to the management of the operational risk of a commercial bank, based on the recommendations given by the Basel Committee on Banking Supervision.The article is aimed at developing an effective system for managing the operational risk of a commercial bank.The empirical level research methods used in this article are a description of what operational risk is, its types, tools and methods of assessment; comparison of operational risk management systems in the studied banks; generalization, analysis and synthesis of the information received; the hypothetical-deductive method is used at the theoretical level.Modernization and improvement of the operational risk management system helps stabilize the bank, increase stability and increase profitability, reduce the provision of capital for operational risk, and increase the attractiveness of banking services for consumers, thus benefiting a credit institution among competitors. In today's financial environment, the effective operational risk management is inherent in the long-term development strategy. 

scholarly journals A proposed operational risk management framework for small and medium enterprises

2017 ◽  
Vol 20 (1) ◽  
Author(s):  
Micheline J. Naude ◽  
Nigel Chiweshe
Keyword(s):  
Risk Management ◽  
Small And Medium Enterprises ◽  
Relevant Literature ◽  
Management Strategies ◽  
Operational Risk ◽  
Management Framework ◽  
Operational Risk Management ◽  
Operational Risks ◽  
Risk Management Framework ◽  
Medium Enterprises

Background: The gap between small and medium-sized enterprises (SMEs) and large businesses that perform risk assessment is significant. SMEs continuously face many operational risks and uncertainties in their daily operations, and these risks threaten to reduce productivity, increase costs and reduce profits.Aim: The purpose of this article was to develop an operational risk management framework that SMEs can use to identify and analyse risks in their operations and take corrective actions to mitigate these risks.Setting: Small and medium-sized enterprises in South Africa do not view risk management as a key component of organisational success, despite evidence that businesses that adopt risk management strategies are more likely to survive and grow.Methods: The article is exploratory in nature, and a conceptual analysis approach was used to formulate the framework. This study reviewed relevant literature sources on risk published between 2002 and 2017.Results: The four process steps of risk management were used as a reference point and form the foundation for the operational risk management framework. The categories of operational; marketing; technical and financial risks were identified from a review of available literature on risk management.Conclusion: There is a dearth of research that deals with operational risk management frameworks for SMEs. The expected contribution of this article, therefore, is twofold: firstly, it is envisaged that managers or owners of SMEs could use the proposed framework as a tool to appraise and minimise their operational risks; secondly, it will add to the current body of knowledge on risk appraisal for SMEs.

scholarly journals Empirical Analysis of Financial and Non-Financial Risks of the Commercial Bank

2019 ◽  
Vol 8 (2) ◽  
pp. 101 ◽  
Author(s):  
Asie Tsintsadze ◽  
Vladimer Glonti ◽  
Lela Oniani ◽  
Tamar Ghoghoberidze
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Operational Risk ◽  
Financial Risks ◽  
Operational Risks ◽  
Increase Risk ◽  
Method Approach ◽  
Selection Of ◽  
Regressive Analysis

Background: Activities of commercial banks are connected with numerous risks, the source of which is the internal and external processes of the bank. Objectives: Risk management science has been studying the origins of the risks, determining their impact quality and avoiding expected loss models from the 1950s. Method/Approach: Credit risk regressive analysis is based on the selection of effective factors, determination of their influence and prediction of future according to the correlation coefficient. Results/Findings: In the article, it is discussed the regressive analysis of operational risk. Conclusion: The effect of credit and operational risks on the financial results of the Bank is based on the results obtained and recommendations have been developed to increase risk management efficiency. Keywords: credit risk, operational risk, regressive analysis, risk management, forecasting.

scholarly journals Danske Bank—A Smorgasbord of Risks

2020 ◽  
Vol 2 (3) ◽  
pp. 1
Author(s):  
Patrick McConnell
Keyword(s):  
Risk Management ◽  
Money Laundering ◽  
Large Scale ◽  
Financial Institution ◽  
Operational Risk ◽  
Initial Report ◽  
Study Approach ◽  
Operational Risks ◽  
Terrorism Financing ◽  
To Come

In September 2018, Danske Bank, the largest bank in Denmark and one of the largest in the Nordic region, published a report which detailed that the bank’s board had fallen into lapses in Anti-Money Laundering/Counter Terrorism Financing (AML/CTF) policies at the bank, in particular, within its Estonian subsidiary. The report was devastating in its criticism of AML processes in the Estonian branch, stating that, over a period of several years, “all lines of defence failed” to manage money laundering risks. Soon after the publication of this report, the CEO of Danske resigned, causing the details of the underlying scandal to become public knowledge (although some the issues involved had been aired publicly on a number of occasions previously). It was also revealed that the bank had become the subject of criminal investigations by US authorities. While the events that are covered in the initial report related to failures to manage AML risks, the situation is more complex than merely deficient AML controls in a remote branch. There was a failure to manage a smorgasbord of different types of risks at both the local and group (i.e., headquarters) level, including: strategic risks; technology risks; and especially operational risks. As befits a sophisticated modern financial institution, Danske Bank operates a group-wide enterprise risk management (ERM) framework covering multiple types of risk (credit, market operational, etc.). The fact that the failure to manage the AML risks took several years to come to light casts doubts on the efficacy of their ERM framework and its implementation. Using Turner’s case study approach, this paper considers the Danske Bank case from the perspective of operational risk management with a view to identifying lessons that can be learned from the scandal that can be applied to future, large-scale operational risk events.

Firm Size, Operational Risk and Performance: Evidence from Commercial and Services Companies Listed in Nairobi Securities Exchange

2019 ◽  
Vol 3 (VI) ◽  
pp. 372-379
Author(s):  
Susan Kerubo Onsongo ◽  
Stephen Muathe ◽  
Lucy Mwangi
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
Firm Size ◽  
Random Effect ◽  
Random Effect Model ◽  
Operational Risk ◽  
Target Population ◽  
Annual Reports ◽  
Operational Risks ◽  
And Performance

The study sought to assess the financial performance of the companies listed in the commercial and services sector at the Nairobi Securities Exchange (NSE), Kenya with an aim of determining the implications of firm size and operational risk on their performance. It was anchored on the agency theory. The study applied explanatory research design and the target population was the 14 companies listed under this sector. Secondary panel data contained in published annual reports for the year 2013 to 2017 was collected. A panel regression model was applied with the random effect model being used based on the Hausman specification test. Findings showed that operational risk had a positive insignificant effect on performance as proxied by return on assets (ROA). The findings further showed that firm size had a moderating effect on the relationship between operational risks and performance. It concluded that firm size played a role in the risk management of a company i.e. companies with higher total assets managed risk better than their counterpart. The study recommends that for companies to record improved financial performance, they needed to manage their operational risks by implementing risk management initiatives and increasing their total assets base.   

Institutionalizing Operational Risk Management: An Empirical Study

2014 ◽  
Vol 29 (1) ◽  
pp. 59-72 ◽  
Author(s):  
Carol Hsu ◽  
James Backhouse ◽  
Leiser Silva
Keyword(s):  
Risk Management ◽  
Financial Institution ◽  
Technological Development ◽  
Operational Risk ◽  
Structuration Theory ◽  
Management Approach ◽  
Operational Risk Management ◽  
Operational Risks ◽  
Role Of It

This paper examines the development of operational risk management (ORM) in a financial organization, focusing in particular on the role of IT in institutionalizing the new regime. Through an interpretive case study in a major US financial institution, the paper uses Giddens’ structuration theory to examine how it adjusts to the demands of protecting itself against new operational risks. The discussion and results of our study are expressed in three propositions: (1) the regulatory context and technological development affect the shape and the outcome of ORM; (2) implementing ORM is a process of reflexive monitoring and transforming organizational practices in a financial institution; (3) the role of IT in ORM is contingent on the extant organizational structure and on the choice of risk management approach.

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